Financial Wellness: Is Your Workforce Fiscally Fit?

Nearly half of all households have credit card debt, increasing numbers are spending 50% or more of disposable income on housing costs or experiencing financial limitations due to low credit scores. On the other hand, outside of direct compensation, most companies consider the financial wellness of their employees only in context of longer-term retirement readiness focusing on broad messages to encourage saving and suitable investment strategies in a defined contribution or 401(k) retirement program. Employer-driven retirement wellness strategies often fail to consider immediate financial distress that can be a major deterrent to saving for the future. Retirement strategies often achieve only limited success, increasing employee frustration while also adding a palpable risk to the organization.

Lack of employee financial wellness can present challenges to employers akin to those posed by poor physical or mental health. Productivity losses, hidden costs, succession planning setbacks, retirement readiness anomalies, and workforce management adversities all can occur. Recent studies indicate that:

• Over 20% of US employees admit to missing at least one day of work each year to address a financial problem.
• Around 15% claim they are financially stressed.
• 40% of voluntary employee turnover is related to stress.
• 50% of employee stress is tied to financial stress.

If your employees fit this profile, they may be spending four to five hours per week dealing with personal financial challenges! Not only will reducing financial stress improve on-the-job productivity and retention, it will also reduce the risk of corporate expenditures being misspent.

There is value in getting your employees fiscally fit! Leaders are accountable to ensure that corporate spending produces intended outcomes.

Focusing attention on better employee spending decisions and increased confidence in managing finances not only will reduce financial stress and improve on-the-job productivity and retention, it will also reduce the risk of corporate expenditures (intended to build future financial wellness) being misspent on todays expenses.

UNDERSTAND YOUR PEOPLE

To get started, define a clear set of financial fitness expectations for employees. Targets vary for different demographic segments of the workforce financial issues vary among generations, industries, career statuses, and individual post-retirement needs, etc. Analytics and measurement can frame the big picture as well as find specific hotspots that need more attention.

Start with small groups to gain understanding, define appropriate activities to maximize desired outcomes, fine tune them, and then launch more securely with bigger groups.

Look at other sources of supporting information, such as health care and voluntary benefit elections and utilization; leverage payroll and HRIS to get demographic data and insight. In terms of retirement preparedness, defining employees needs at various stages in the financial lifecycle and meeting them where they are helps establish a retirement readiness expectation and ways to achieve it.

ENGAGE YOUR PEOPLE

Employees need to do their part as well they have to engage in the process and take actions to help themselves, based on expectations established for the workforce. The good news is recent surveys show employees appreciate employer help with financial wellness.

Employers who see the shared value in this financial fitness dialogue position themselves as an employer of choice, gaining both a competitive advantage for talent and a stronger balance sheet.

Research shows that, generally, 20% of the workforce is likely already engaged in some form of self-directed financial wellness. Another 30% can be nudged toward engagement with appropriate targeted messages. The remaining half are not likely to actively engage a please do it for me approach typically works best.

ENJOY THE PAYOFF

Poor decisions today can have a devastating long-term impact on a persons financial future. Regardless of the fiscal fitness regimen, engaging employees will require clear expectations, followed by ongoing diligence and perseverance (just like any fitness program). The payoff for both the employer and its employees can be priceless.

Watch this video to learn more:

Valerie Paganelli ([email protected]) is a partner at Mercer in Seattle. She is an actuary with a specialty in retirement programs, known for helping organizations mitigate risks associated with the financial, operational, and workforce components of employee benefits programs.

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